DHFL Creditors Vote Against Higher Payout To Depositors, NCD Holders

The committee of creditors of Dewan Housing Finance Corporation Ltd. has voted against a proposal to increase payouts to fixed depositors and non-convertible debenture holders in the company. A proposal to repay the Rs 39 crore claim by the Army Group Insurance Fund in full was also voted down, two people in the know said.

A vote on the proposal to raise payout to small depositors closed late Tuesday night.

The proposal had sought to increase fixed depositors recovery to 41% from 23% earlier, one of the people quoted above said. Similarly, in case of unsecured NCD holders, the proposal suggested the recovery rate be increased from 5% to 41%, this person added.

BloombergQuint has reviewed a copy of the voting results which show:

• 89.19% of the financial creditors voted against the proposal. At least 66% of the financial creditors must vote in favour of a proposal for it to be passed.

Separately, a majority of the committee of creditors voted to authorise representatives of State Bank of India, Union Bank of India and Catalyst Trusteeship to act on their behalf for further actions in the DHFL case. This includes the implementation of Piramal Group's resolution plan for the housing financier.

A message sent to DHFL administrator R. Subramaniakumar was not immediately answered.

While the National Company Law Tribunal approved Piramal Group's plan to buy DHFL under the Insolvency & Bankruptcy Code, it had requested the creditors to consider increasing the payments to smaller creditors.

In its order on June 7, the tribunal said that investment in FDs, NCDs are considered as a low-risk investment compared to equity. And so, small investors should not be put to more risk and take a larger hair cut than stronger financial institutions. The tribunal gave the creditors two weeks to complete the process and report back.

The fixed depositors and unsecured NCD holders had voted against the Piramal Group plan, making them dissenting financial creditors in the scheme. Fixed depositors had admitted claims worth over Rs 5,400 crore, while unsecured NCD holders had claims worth Rs 1,500 crore.

Prior to the NCLT's approval of the plan, Piramal Group had received regulatory approvals from the Reserve Bank of India and competitions regulator. The buyer is currently in the process of implementing the resolution plan, which is expected to be completed by August.